Sylvania Girard Railroad Co. v. Hoge

1. The general railroad incorporation act (Civil Code, § 2163) gives the management of the affairs of the corporation to a board of directors of not less than five and not more than fifteen members. The act further provides for the annual election of directors. Where stockholders attend a regular annual meeting of stockholders, they may transact the business of that meeting, and elect officers, although a majority in interest or in number of the stockholders are not present. If at any such meeting they fail or refuse to elect directors, any stockholder may by mandamus compel the corporation and the directors holding over to call a meeting for the purpose of electing a board of directors.

2. A shareholder is not prevented from exercising his right as such because another may be beneficially interested in the ownership of the stock.

3. A sale of stock, by one who is a party to a pooling agreement, to some of the other stockholders, in violation of its terms, does not justify the corporation of its own motion, for that reason alone, to refuse to recognize the validity of such transfer.

4. Where neither the charter nor any statute or by-law of the corporation requires that stock be transferred on the books of the company, or the surrender of the certificate and the issuance of a new certificate to the assignee, any mode or form of conveyance sufficient in law to transfer the absolute title to the assignee entitles such assignee to all the rights and benefits accruing to the assignor, just as if the certificate of shares stood in the assignee's name.

5. A shareholder who designedly absents himself from a stockholders' meeting surrenders no right appertaining to the ownership of his stock, except the right to participate in the meeting which he refuses to attend.

6. Where stockholders have failed to hold a regular annual stockholders' meeting and elect directors, a meeting of the old board of directors on the day when the stockholders should have acted, in which they resolve to hold over until their successors are elected, is not in effect a re-election of them by the stockholders for another term.

7. Where the directors are reduced by death below the minimum number prescribed by the charter, and there is no provision in the charter or by-laws for filling the vacancy by the directors, the stockholders may supply the vacancy. 1. The petition presents the case of stockholders seeking to compel a corporation and a majority of its directors to call a meeting of the stockholders for the purpose of electing a board of di- rectors, rectors, after a failure to elect at the last annual meeting. The corporation was chartered under the general railroad law, which provides that a regular election for directors shall be annually held at the principal office of the company. Civil Code, § 2163. The corporation had duly organized agreeably to law, and adopted a resolution providing that the annual meeting of the stockholders should be held on the first Wednesday in January, 1907. The statute imposes the duty on the corporation to hold annual meetings, but fixes no time when they shall be held. As the statute prescribed no fixed time for holding the annual meeting, it was competent for the stockholders to fix the date of such meeting. When so fixed, it became the statutory duty of the corporation to hold the annual meeting at the time thus appointed. At the annual meeting in January, 1907, a minority of the stockholders assembled, but did not resolve themselves into a stockholders' meeting. It was within the power of the minority of the stockholders at the annual meeting to have elected a board of directors. "The law is clear that those stockholders who attend a duly called stockholders' meeting may transact the business at that meeting, although a majority in interest or in number of stockholders are not present." 1: Cook on Stock and Stockholders, § 607. The Civil Code, § 2193, requires a representation of a majority of the stock only at the meeting for organization, and there is nothing in the section to change the general rule as stated by Mr. Cook. For some reason, presumably because they were not informed that it was in their power to legally elect a board of directors, no action was taken at the January meeting. The term of the old board of directors expired at this time, and it was the duty of the stockholders to have elected their successors. As no election was held, any stockholder could by mandamus compel the calling of a meeting for the purpose of complying with the statutory duty. Accordingly, the petition was not open to demurrer because it failed to allege facts entitling the plaintiffs to the remedy of mandamus.

2, 3, 4. We will next inquire as to whether the answer raised any disputed issue of fact. At common law the return to the writ of mandamus was not traversable, and the court determined whether the writ should issue upon the matters set up in the return. By the statute of 4 Anne the return was made traversable, and this was the condition of the common law at the time of our

adopting statute. Johnson v. State, 1 Ga. 273. The common-law practice, however, has been modified by our statute, which provides that if the answer makes an issue of fact, the petition and answer shall be returned to the next term of the superior court, and the issue thus made tried by a jury. Civil Code, § 4872. The petition alleges that all the applicants were stockholders of the railroad corporation. The answer undertakes to join issue as to the ownership of stock in the corporation by two of the applicants. It is admitted that the stock which formerly belonged to H.C. Perkins now stands in the name of the plaintiff S.C. Hoge, but it is charged on belief that the holding of Hoge is really for the benefit of L.H. Hilton. If the certificate of the shares stands in the name of Hoge, we are at a loss to see why he is any the less a stockholder because Hilton may have an interest in his holding, and particularly so when Hilton is a party plaintiff in the petition. The stock which the plaintiff Mills claims to own was issued to J.A. Enneis, and Mills is his transferee. Mills applied to the proper officer of the corporation to have the transfer from Enneis to himself entered upon the books of the corporation, which was refused. It is contended that the transfer of the stock by Enneis to Mills was in violation of a pooling agreement entered into between the stockholders, whereby Enneis agreed that he would not sell or transfer his stock to any one unfriendly to the Morel interest, and that the transfer to Mills, who is friendly to Hilton, was in violation of this agreement. Any such private agreement or understanding between the individuals holding the legal title to the stock in due form, and others, is a matter between themselves, with which the corporation has no concern. Ex parte Willcocks, 7 Cowen, 402 (17 Am. D. 525); In re Long Island R. Co., 19 Wend. 37 (32 Am. D. 429). It is no excuse for the corporation to refuse to issue stock to Enneis's assignee, or to refuse to recognize such assignee as a stockholder, that Enneis may have violated his pooling agreement with certain other stockholders, with the knowledge of his assignee. Where the charter of a corporation provides that shares of stock can only be transferred on the corporate books, the transfer must be made in the way pointed out in the charter, before the transferee would become a shareholder so as to be entitled to participate in the internal affairs of the corporation. Witham v. Cohen, 100Ga. 674 (28 S.E. 505).

The general railroad law under which this corporation was chartered makes no provision as to the manner in which transfers of stock shall be made. It is also within the power of a corporation to adopt by-laws providing how transfers of stock shall be made; and if a by-law be adopted requiring all transfers of stock to be entered upon the books of the corporation, it would be necessary that this requirement be complied with before the transferee of a shareholder could participate as a shareholder in a stockholders' meeting. This corporation was duly organized. With the exception of the resolutions adopted at the organization meeting, and which appear in the statement of facts, no by-laws were adopted by the corporation. The defendant corporation therefore has neither charter nor by-law which requires a transfer of stock on the books. Our code declares, that, "except as against the claims of the corporation, a transfer of stock does not require a transfer on the books of the company." Civil Code, § 1855. This section was codified from the decision in Southwestern R. Co. v. Thomason, 40 Ga. 408, and its meaning is clear in connection with its context in the decision. On page 411 McCay, J., said: "The transfer upon the books of the company is only for the protection of the company; it may have liens upon the stock, or it may require this mode in order that its own management may be complete and within its grasp." The section does not mean that an assignee of stock is not a stockholder of the corporation for lack of a book transfer, when neither charter nor by-law required this mode of transfer. See Buena Vista Bank v. Grier, 114 Ga. 400 (40 S.E. 284);Bates-Farley Savings Bank v. Dismukes, 107 Ga. 212 (33 S.E. 175). Where neither the charter, the statute, nor corporate by-law requires a book transfer, the assignee of a certificate of stock may vote thereon, although the stock stands on the books of the company in the name of the assignor. 1 Cook on Stock and Stockholders and Corporation Law, § 611; Allen v. Hill,16 Cal. 113. In the absence of a regulation requiring a book transfer; or the surrender of the old certificate and the issuance of a new certificate to the assignee, any mode or form of conveyance sufficient in law to transfer the absolute title to the assignee entitles him to all the rights and benefits accruing to the legal owner of the stock, just as if the certificate of shares stands in the assignee's name. People v. Devin,17 Ill. 84. The

transferee, Mills, therefore acquired from the shareholder, by the assignment, title to the stock, and was a stockholder. The facts set up in the answer were insufficient to raise an issue that he was not a stockholder.

5. The other matter set up in resistance to the issuance of the writ was the conduct of the applicants in purposely absenting themselves from the stockholders' meeting, in order to prevent an election of directors at that time. We have shown that the minority of the stockholders had the right at a regular annual meeting to elect a board of directors. We can not perceive any distinction between negligently omitting to attend a meeting of the stock-holders, and staying a way by design. The only forfeiture of right which the absent stockholder incurs is the surrender of his right to participate in the stockholder's meeting. It was the duty of the stockholders present at the annual meeting, even though their holdings were less than a majority of the stock, to have proceeded with the transaction of the proper business, which included the election of directors, and neither the old directors nor the corporation can insist upon the old board holding over another year because the stockholders failed to exercise a duty enjoined by law. The action of the minority stockholders would have been just as legal if these applicants had been there, and no estoppel arises against them from insisting that the corporation perform its duty under the law because they voluntarily absented themselves from the meeting.

6. It is further alleged that the directors, when they discovered that a majority of the stock was not represented at the stockholders' meeting; immediately held a directors' meeting and adopted a resolution declaring that they would hold over until their successors were legally elected, and that this was in effect action by them as stockholders. Not so. The pleadings of both sides are in complete harmony that the stockholders took no action as stockholders, and caused an entry to this effect to be made upon the minutes of the stockholders' meeting. The directors, in passing the resolution extending their terms, did not undertake to act as stockholders, but as directors. Indeed, the resolution that they should hold over until their successors were elected amounted to no more than an incident which the law attaches to the failure of the stockholders to elect their successors.

7. We have not adverted to the point made in the petition that under the law the railroad corporation must have not less than five nor more than fifteen directors, and that as one of the directors had died, the board was not legally constituted. The statute specifically provides that the corporation may provide by-law for the filling of vacancies in the board of directors. Civil Code, § 2163. The corporation by failing to elect did not forfeit its corporate existence. But the stockholders, in the absence of authority under a by-law, could have supplied the vacancy. In re Union Ins. Co., 22 Wend. 591. This proceeding is not to cause the election of a single director to fill a vacancy, but to compel corporate action looking to the election of a full board.

Judgment affirmed. All the Justices concur.